There were facts and some novelties on Wednesday that shake the spirits and the decision -making of the market in the middle of the war turbulence in the Middle East and force to rethink scenarios. On the one hand, it met Fed’s decision to maintain interest rates without changes at 4.25%-4.50%in line with the anticipated by the market, being the fourth consecutive pause of its current flexibility cycle (but they are still waiting for two cuts of the fees in 2025).
On the other hand, within the framework of the war conflict between Israel and Iran, investors scored with the novelty that Donald Trump threatened the Tehran regime With entering the conflictalso asking Iran to surrender without conditions. To which Iran’s supreme leader, Ali Khameini, replied with a public statement that “they will never give up”. So that the conflict will continue and now the risk is that Trump attack Iran or the current regime feels threatened and can attack the ships of the Ormuz Strait as retaliation what would make it notably increasing The price of oil and could bring the world to a recession.
In this regard, the market consensus is that a possible closure of the Ormuz Strait would imply a strangulation of world energy trade, since there is more than 20% of the oil consumed globally. So, How should investors react or prepare in the event that they will decide to kick the board?
Faced with this question, the analysis of Joseph Adinolfi, Marketwacht, is interesting with the veteran geopolitical analyst Marko Papic, of BCA Research, who, focused on the intersection of the markets and geopolitics, considered that even if the conflict between the two staunch rivals intensified, and to the point where they will try to close the narrow impact on the narrow. Markets would probably be limited. According to Papic, an experienced in macroeconomic and geopolitical issues that he knows very well medium east, and they will quite live there, that means that any investor who wishes to operate with headlines in the media related to war should be prepared to do two things: You have to be really prepared to sell short oil and buy shares.
Wall Street: What scenario would cause a true disturbance?
Wall Street commits with the critical risk of a probable closure of the Ormuz Strait so investors should monitor closely. But according to Papic, even if the United States decides to join the war against Iran, any subsequent liquidation of actions would probably be fleeting. Today, the only scenario that would cause a true disturbance in global markets would be that they will try to close the Ormuz Strait, although also the decision to attack the region’s energy infrastructure could have an impact. Adinolfi comments that there are reports that realize that Iranian leaders have declared that the closure of the Strait, which Papic called the “Nuclear option” For the Iranian regime, it is under consideration.
However, the analyst recognizes that although Iran has threatened to close traffic through the Strait repeatedly over the years, he has never done so, and rightly. Even if Iran tried this time, I probably couldn’t keep the narrow closed for a long time. In such a scenario, Papic said that It could foresee a sudden increase in oil prices of 50% or more. However, the measure would probably be ephemeral, since such an extreme measure by Iran would probably cause a rapid military response from Washington, perhaps with the help of other regional actors such as Saudi Arabia, which would be equally outraged by Iranian tactics, Papic explained. “Either Iran surrenders, or tries to close the Ormuz Strait, closes it for two or three weeks, the markets come into panic and, at the end of that panic, the oil flow continues”broad.
The role of the United States
It should be noted that days ago, maritime commercial operations of the United Kingdom issued a notice that warned a growing electronic interference in the Ormuz Strait, although so far it has not been reported of anything more significant. While the US participation in the war is not guaranteed at this time, it seems increasingly possible despite the doubts of some sectors of Trump’s political base, Papic told Marketwacht.
In the event that the US decides to intervene, you probably do not need to display troops, since American bombers would be enough to devastate Iran’s economic and military infrastructure from the air, said Papic who highlighted the transfer of US carriers to the region as a sign of demonstration of strength and Washington’s commitment to Tel Aviv, although technically they are not necessary. “The United States already has more than enough assets in the Middle East, not to mention that it has the ability to attack Iran from Missouri”held. And, in the event that the destructive confrontation between Iran and Israel intensified substantially, even then, Papic does not see many possibilities that a broader disturbance of world markets and economy occurs.
Source: Ambito
